Feds to probe Vegas grocery deal

Grace Leong

Friday, Oct. 4, 2002 | 11:17 a.m.

State officials and Kroger Co. say the Federal Trade Commission is investigating Kroger's planned purchase of 18 Raley's stores in the Las Vegas area because of antitrust concerns.

The concern is that food costs may rise because of reduced competition.

Kroger, the Cincinnati-based parent company of Smith's Food & Drug and Food 4 Less, said it is acquiring the 18 Raley's stores for an undisclosed price and plans to convert eight of the stores to Food 4 less and seven to Smith's outlets by the end of October. Three Raley's supermarkets would be closed under the deal.

Kroger said Thursday it was confident its planned acquisition will clear the review by the FTC -- even though the last big grocery buyout in Las Vegas, Albertsons purchase of Lucky markets from American Stores Co., resulted in the forced sale of some stores to Raley's to comply with antitrust law.

"We are working with the FTC to answer any questions that it may have concerning our plans for the stores," said David B. Dillon, Kroger president and chief operating officer. "We are hopeful that the FTC's review process will be completed as soon as possible so that we can finalize the acquisition and begin converting these stores to our Smith's and Food 4 Less banners."

FTC officials declined comment on whether the agency is investigating the transaction.

Chris Van Dyck, senior deputy attorney general with the Nevada Bureau of Consumer Protection in Carson City, said the review is still in early stages and that the "small market concentration in the grocery store industry may pose concerns for anticompetitive price impacts."

"It's my understanding that the FTC is investigating Kroger's purchase. Kroger wants to move quickly. But the FTC needs more time, and Kroger needs to give us time to do the review."

"From an antitrust perspective, anytime you have an existing business offer to buy several stores from one of its competitors, it automatically raises red flags. And Raley's is competing against Smith's and Food 4 Less," he said.

"Anytime you reduce a customer's ability to choose, you have to analyze the transaction and determine whether there'll be anticompetitive impact with respect to prices, since fewer competitors could lead to an upward pressure on prices," he said.

Van Dyck said the state is also reviewing the transaction and that it hasn't made a final decision on whether the deal is a good one for the Southern Nevada economy.

Attorney General Frankie Sue Del Papa last month called on the FTC to investigate the deal.

"I am very concerned that this transaction may have deleterious effects in Las Vegas' retail grocery markets," Del Papa said in a letter to the federal agency. "Kroger Co. intends to simply close three of the Raley's stores, which, if allowed to occur, would constitute a blatant example of output reduction and eliminate jobs in an already stressed economic environment."